Waste Not, Want Not: Can Municipal Wastewater Be Treated Privately?

The treatment of municipal wastewater doesn’t have to be an expensive duty of local government. In fact, it’s increasingly being thought of as something the private sector can handle better and at lower cost.

Wastewater treatment has historically been regarded as a high-cost municipal function. Treatment plants in many Michigan communities have proven to be among the most expensive capital investments, and regulations that must be met to secure federal funding of new ones have delayed construction and prevented the adoption of innovative technologies. Stories about "America’s crumbling infrastructure" often neglect to mention that more than roads and bridges need to be brought up to date; wastewater treatment facilities owned by local governments often need plenty of improvements as well.

Those improvements—and cost savings too—emerge when and where private companies in the wastewater business enter the picture. Municipalities which have contracted with them benefit from the experience and expertise of the private firms and from the competitive efficiencies that this "privatization" process generates.

Hamilton Lakes, Illinois, is home to the country’s most innovative wastewater privatization experiment: a wastewater recycling plant built entirely with private financing in less than a tenth of the time it normally takes for local governments to build a more run-of-the mill facility. According to economist Stephen Moore of the Cato Institute, this one not only cost 30 percent less to build than public construction, but it also treats the water, disinfects it in air-filtered reservoirs and then pumps it out for irrigation and other commercial purposes. Public plants, by contrast, typically dump the treated water back into a lake or stream.

Jack Sheaffer, a one-time Environmental Protection Agency employee and the man who developed this so-called Land Treatment Technology, makes sense when he says: "It is far more efficient and environmentally sound to use wastewater as a resource rather than to try to dispose of it." It’s the sort of innovation that a private firm has more freedom (and incentive) to adopt than municipalities which have to contend with the regulatory strings that come attached to state and federal dollars.

Edgewater, New Jersey, took wastewater private in 1988 when it contracted with a private firm to build and manage a $10 million treatment plant. Again, the reason for privatization was to put the project on the fast-track, take advantage of the know-how that private sector engineers had developed, and save taxpayer dollars.

Wastewater privatization took root in Michigan in the 1980s. Today, many towns and townships in both the Upper and Lower Peninsulas have put it to work and cities like Oscoda, East Tawas, and Cheboygan are enjoying the benefits of private-sector involvement in local water and wastewater treatment.

The first private Michigan company to operate treatment facilities under contract with local governments, WW Operations Services of Grand Rapids, was started in 1982. Since that time, WW has been bought out by Earth Tech, also of Grand Rapids, Michigan.

Alpena in northern Lower Michigan is the former WW’s showcase city. Prior to privatization in 1988, Alpena’s wastewater plant was in a state of non-compliance with EPA regulations and several hundred thousand dollars over budget. Three years after privatization, the city of Alpena received two national awards from the EPA for that same facility. The city is saving an estimated $250,000 each year, for a total savings of almost $1 million between 1988 and September 1992. In the summer of 1996, Earth Tech received a four year renewal contract and a four year option for renewal.

Contrary to a popular objection to privatization, Alpena’s savings have come from efficiencies and innovations, not from pay cuts or mass layoffs of formerly public employees. When WW took over, it kept all but two of the city plant’s employees, provided them with additional training and actually raised their pay. Shortly after privatization, the employees were pleased enough with their new employer that they decertified the union that previously had represented them in negotiations with the city.

Tom Kelly, the [then] councilman and Alpena’s mayor pro-tem, cited WW’s "good utilization of employees" for making a big difference in plant operations. "A big part of the success here," he says, "is the company’s desire to develop the skills of the employees and pay them for it; it does wonders for their motivation and initiative." Machinery and equipment, for instance, was falling into disrepair under city management but the company’s program of preventive maintenance has energized the employees to "keep everything in good shape and running smoothly," according to Kelly.

The Alpena plant, under WW’s stewardship, has been nationally recognized for its positive contributions to the area’s environment. The company has literally "manufactured" soil through a process that reclaims huge mounds of waste cement dust (called "moonscape") from a nearby kiln by mixing it with treated sludge from the wastewater plant. Grass now grows where nothing did before.

As communities all over Michigan bump up against opposition to higher taxes at the same time they need to provide and upgrade services, infrastructure privatization will become an increasingly attractive option. There’s no reason wastewater treatment shouldn’t be high on the list to go private. The track record—in this state and around the nation—proves that it can be made to work and work well.